Climate Insurance Hot Prospect for Ethiopia
In late October 2015 in Ethiopia, a total of 12,000 smallholder farmers in four regions started to benefit from this nation's first weather index insurance claims payment to cover the loss for the previous year's crop failure due to El Nino. The weather index insurance claims paid out 2.6 million birr covering a total of around the selected smallholder farmers in Oromia, Gambella, Benishangul Gumuz and Tigray regions. The pilot insurance initiative is supported by UNDP/GEF and the Ministry of Environment, Forest and Climate Change in collaboration with two local firms, the Oromia and Nyala insurance companies.
Recently, the Oromia Insurance Company (OIC) paid 1.6 million birr to farmers who lost their cattle's due to El-Nino caused drought and benefited 1,470 farmers. And also OIC worked on a proactive type of insurance through environmental work projects.
The prospects of climate insurance could be gigantic business since climatic risks are inevitable. Besides, with the inevitable path towards the net-zero emission targets, the industry has the opportunity to engage proactively with other key stakeholders to find the best investment strategies. However, the non-affordability of insurance premiums, pricing difficulties, unfamiliarity with insurance by mass population, food insecurity as most farmers have debt for agricultural inputs such as fertilizers and other social problems, a dearth of insurance companies in countryside's and rural areas and lack of comprehensive legal and institutional framework both internationally and domestically remains to be a challenge.